YOUR INSURED FUNDS WHERE CAN I FIND MORE INFORMATION? Call toll-free , op on 2

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1 WHERE CAN I FIND MORE INFORMATION? Call toll-free , op on 2 Read more about NCUA Share Insurance at: MyCreditUnion.gov/shareinsurance Calculate share insurance coverage Use NCUA s Share Insurance Es mator at: MyCreditUnion.gov/es mator Send ques ons by to the Division of Consumer Access at: DCAMail@ncua.gov Mail ques ons Na onal Credit Union Administra on A n: Division of Consumer Access 1775 Duke Street, Alexandria, VA YOUR INSURED FUNDS Na onal Credit Union Administra on O ce of Consumer Protec on National Credit Union Administration Office of Consumer Protection

2 The Na onal Credit Union Administra on (NCUA) operates the Na onal Credit Union Share Insurance Fund (NCUSIF) to protect accounts at federally insured credit unions up to $250,000. The $250,000 in coverage applies to each share owner, per insured credit union, for each account ownership category. This booklet provides examples of insurance coverage under NCUA s rules. Because the scope of this booklet is limited, credit union members should contact their federally insured credit unions or NCUA s O ce of Consumer Protec on for further share insurance coverage details about situa ons not addressed in this booklet. Contact informa on for the O ce of Consumer Protec on is available on the back cover of this booklet. Members or their counsel may also wish to consult the NCUA Rules and Regula ons rela ng to share insurance coverage published in the Code of Federal Regula ons (12 C.F.R. Part 745). Also, you can nd NCUA s insurance regula ons at ncua.gov. Addi onal informa on about share insurance coverage is available at MyCreditUnion.gov. The Federal Credit Union Act and NCUA rules on share insurance coverage control how accounts will be insured at each federally insured credit union. No persons may imply a federally insured credit union can o er coverage that di ers from this formal structure. Also, members should review their accounts periodically and whenever they open new accounts or modify exis ng accounts to ensure that all their funds remain insured. 1

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4 FORWARD The purpose of this booklet is to help you understand your share insurance protec on. NCUA is an independent agency of the U.S. Government. NCUA regulates, charters, and insures the na on s federal credit unions. In addi on, NCUA insures state-chartered credit unions that seek and qualify for federal insurance. In most states, state law requires state chartered credit unions to be federally insured. The shares in your credit union are insured by the Na onal Credit Union Share Insurance Fund (NCUSIF), which is backed by the full faith and credit of the U.S. Government. Established by Congress in 1970 to insure member share accounts at federally insured credit unions, the NCUSIF is managed by NCUA under the direc on of its three-person Board. Your share insurance coverage is similar to the deposit insurance coverage o ered by the Federal Deposit Insurance Corpora on (FDIC). Credit unions that are insured by the NCUSIF must display in their o ces the o cial NCUA insurance sign, which appears on the cover of this booklet. All federal credit unions must be insured by NCUA, and no credit union may terminate its federal insurance without rst no fying its members. Here are some important facts to remember about your share insurance coverage: No member of a federally insured credit union has ever lost one penny of insured savings. 3

5 The NCUSIF has several programs to help insured credit unions that might be experiencing problems. Liquida ons or failures are a last resort. In the rare instances when a federally insured credit union does fail, NCUA will make any necessary payouts to the credit union s members. These payouts are usually made within 3 days from the me the credit union closes its doors. As a member of a federally insured credit union, you do not pay directly for your share insurance protec on. Your credit union pays a deposit and an insurance premium when required into the NCUSIF based on the total amount of insured shares and deposits in the credit union. Insured credit unions are required to deposit and maintain one percent of their insured shares and deposits in the NCUSIF. 4

6 TABLE OF CONTENTS Share Insurance Coverage 7 Frequently Asked Ques ons 9 Single Ownership Accounts 22 Joint Accounts 25 Revocable Trust Accounts 34 Accounts Held by Executors or Administrators 45 Accounts Held by a Corpora on, Partnership or Unincorporated Associa on 46 Accounts Held by Government Depositors 48 Trust Accounts and Re rement Accounts 53 For More Informa on from the NCUA 59 5

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8 SHARE INSURANCE COVERAGE Properly established share accounts in federally insured credit unions are insured up to $250,000. Generally, if a credit union member has more than one account in the same credit union of the same ownership, those accounts are added together and insured in the aggregate. There are excep ons though. You may obtain addi onal separate coverage on mul ple accounts, but only if you have di erent ownership interests or rights in di erent types of accounts and you properly complete account forms and applica ons. For example, if you have a single ownership regular share account and an Individual Re rement Account (IRA) at the same credit union, the regular share account is insured up to $250,000 and the IRA is separately insured up to $250,000. However, if you have a regular share account, a share cer cate, and a share dra account, all in your own name and without any bene ciaries, you will not have addi onal coverage. Those accounts will be added together and insured up to $250,000 as your individual account. Addi onally, shares denominated in foreign currencies are insured as outlined in NCUA Rules and Regula ons. Coverdell Educa on Saving Accounts (or 529 Accounts), formerly educa on IRAs, are insured as irrevocable trust accounts and will be added to a member s other irrevocable trust accounts and insured up to $250,000. Roth IRAs will be added together with tradi onal IRAs and insured up to $250,000. You may also qualify for addi onal coverage on revocable trust (formal or informal commonly referred to as payable on death) accounts. 7

9 A co-owner s interest in all joint accounts in the same credit union will be added together and insured up to the maximum of $250,000. 8

10 FREQUENTLY ASKED QUESTIONS ABOUT THE NATIONAL CREDIT UNION SHARE INSURANCE FUND 1. Which credit unions are insured by the NCUSIF? The NCUSIF insures member shares in all federal credit unions and those federally insured, statechartered credit unions that apply for and meet the insurance standards. Insured credit unions are required to indicate their insured status in their adver sing and to display the o cial NCUSIF sign at their o ces and branches. Some state-chartered credit unions may be insured by private insurance or guaranty corpora ons. This coverage is separate and apart from the NCUSIF and is not backed by the full faith and credit of the U.S. Government. 2. How does the NCUSIF protect credit union members against loss? Each credit union approved for NCUSIF coverage must meet high standards of safety and soundness in its opera ons. Federal and state examiners, as appropriate, conduct regular examina ons to determine whether federally insured credit unions are following these standards. If an insured credit union gets into nancial di cul es and must be closed, the NCUSIF acts immediately to protect each member s share accounts. 3. Does the NCUSIF protec on apply only if a credit union is liquidated? No. Liquida on is the only situa on in which a member is directly provided share insurance protec on by the payment of a check for his or her insured savings. However, indirect protec on 9

11 is provided when the NCUA Board, through the NCUSIF, authorizes nancial assistance to a credit union to enable it to overcome a temporary nancial setback. In a case where a credit union is unable to overcome its di culty, nancial assistance may be authorized to assist its members in con nuing to receive credit union service at another insured credit union through either a merger or acquisi on. 4. How does NCUSIF pay members their shares when an insured credit union is liquidated? Checks for each member s shares (less any amounts due on outstanding loans) up to the insurance limit are mailed to the member s last known address as shown in the records of the credit union. These checks are usually mailed within 3 days a er the credit union is placed into liquida on. In situa ons where on-site payment is more convenient, the NCUA liquida on team will give checks directly to members. 5. What happens to the member s share account when an insured credit union is merged into another insured credit union? Each member s share account is transferred to the con nuing credit union. Accrued dividend credits are also transferred. On the e ec ve date of the merger, each merging credit union member has full membership rights to all the nancial services provided by the con nuing credit union. 6. Does the NCUSIF protect the interests of creditors? No. The NCUSIF protects only credit union members. 10

12 FREQUENTLY ASKED QUESTIONS ABOUT GENERAL SHARE INSURANCE COVERAGE 7. What is the Standard Maximum Share Insurance Amount? The Standard Maximum Share Insurance Amount for a credit union member is $250,000. Share accounts maintained in di erent rights or capaci es, or forms of ownership, may each be separately insured up to the $250,000 standard maximum, or in the case of certain re rement accounts, up to $250,000. Thus, a member may hold or have an interest in more than one separately insured share account in the same insured credit union. 8. What types of accounts are insured? All types of member share accounts and deposits received by the credit union in its usual course of business, including regular shares (savings accounts), share cer cates, and share dra accounts (checking accounts) are insured. Investment products o ered by a credit union to its members, such as mutual funds, annui es, and other non-deposit investments are not insured by the NCUSIF. 9. Is the NCUSIF coverage increased by placing funds in two or more of the same kind of share accounts in the same credit union? No. The NCUSIF coverage is not increased merely by dividing funds owned by the same person or persons into one or more of the di erent kinds of share accounts available. For example, a regular share account, a share dra account and a share cer cate account owned by the same member with no bene ciaries are added together and insured up to $250,000. Insurance can be increased 11

13 by opening a di erent type of account - one that is held in a di erent right and capacity. For example, insurance on a single ownership account is separate from insurance on a joint account. 10. If a member has accounts in several di erent insured credit unions, will the accounts be added together for the purpose of insurance coverage? No. The NCUSIF coverage is applied to share accounts in each insured credit union. A member who has share accounts in two or more di erent insured credit unions would have coverage up to the full insurable amount in each credit union. In the case of a credit union having one or more branches, the main o ce and all branch o ces are considered as one credit union. FREQUENTLY ASKED QUESTIONS ABOUT INSURANCE FOR INDIVIDUAL AND JOINT ACCOUNTS 11. If a member has more than one individual account in the same insured credit union, is each account insured to $250,000? No. Individual share accounts held by the same member are added together and are insured up to $250,000. An individual share account is an account solely owned by one individual, without bene ciaries, and the right of withdrawal by another individual. IRA and Keogh accounts are insured separately. 12. What types of joint accounts may be insured? The NCUSIF covers joint accounts owned in any manner conforming with applicable state law such as joint tenants with a right of survivorship, 12

14 tenants by the en re es, tenants in common, or an account owned by a husband and wife as community property in states recognizing this par cular form of joint ownership. 13. If two or more persons, such as husband and wife, have a joint account in the same credit union as well as their own individual accounts, is each account separately insured? Yes. A person s interest in joint accounts are insured separately up to $250,000, provided each co-owner has personally signed an account signature card and has a right of withdrawal on the same basis as the other co-owners. 1 However, the insurance protec on for a co-owner on joint accounts is not increased by rearranging the names of the owners, changing the style of names, or by establishing more than one joint account. The interests that a par cular co-owner has in all joint accounts held in the same credit union will be added together and insured up to $250, Does the standard maximum of $250,000 apply if funds in the individual and joint accounts of husband and wife all consist of community property? Yes. In those jurisdic ons recognizing community property, community funds may be maintained in accounts in the individual names of each spouse or 2 a joint account in the names of both. The individual account of the husband and the individual account of the wife will each be insured 1 If state law limits a minor s right of withdrawal, the account will s ll be insured as a joint account. The signature of each co-owner is not required on a share cer cate. 13

15 up to $250,000. As co-owners, the interest of the husband and wife in the joint account will each be insured up to $250,000. FREQUENTLY ASKED QUESTIONS ABOUT SPECIAL ACCOUNTS 15. What is the NCUSIF coverage on a trust account held under the provisions of an irrevocable express trust? The trust interest of a bene ciary in a valid irrevocable trust, including Coverdell Educa on Savings Accounts (or 529 Accounts), if capable of evalua- on in accordance with published rules, is insured up to $250,000 separately from the individual accounts of the se lor (grantor), trustee, or the bene ciary. Either the se lor or the bene ciary must be a member to obtain insurance bene ts. All trust interests created by the same se lor (grantor) in the same credit union for the same bene ciary will be added together and insured in the aggregate to $250, What is the insurance coverage on a revocable trust account, a tenta ve or To en trust account, a payable-on-death (POD) / in trust for (ITF) account, or a qualifying living trust account? These accounts, or any similar accounts which document the owner s inten on to have the funds pass on to a named bene ciary a er the owner dies, are considered revocable trust accounts. The funds in such accounts are insured for the owner, also known in formal trusts as se lor or grantor, up to $250,000 for each bene ciary separately from any other individual accounts of the owner. If the bene ciary is not a natural person or charitable organiza on or other non-pro t en ty 14

16 under the Internal Revenue Code of 1986, the funds in the account that are a ributable to that bene ciary are treated as an individually owned account of the owner, aggregated with any other individual accounts of the owner, and insured to the up $250,000. In the case of a revocable trust account, the person who holds the power of revoca on is deemed to be the owner of the funds in the account. 17. What is the insurance coverage on a joint revocable trust account? A joint revocable trust account is a revocable trust account, as described above, that is established by more than one owner and held for the bene t of others, some or all of whom are natural persons or a charitable organiza on or other non-pro t en ty under the Internal Revenue Code of The respec ve interests of each co-owner held for the bene t of each bene ciary will be separately insured up to $250,000. The interest of each co-owner will be deemed equal unless otherwise stated in the share account records of the federally insured credit union. Interests held for bene ciaries other than those described above will be added to the individual accounts of the co-owners. When a husband and a wife establish a revocable trust account naming themselves as the sole bene ciaries, the account will not be insured as a joint revocable trust account, but will instead be insured as a joint account. 18. Is a co-owner on a revocable trust account insured if they are not a member in their own right? No. A revocable trust co-owner needs to be a member of the credit union for that owner s 15

17 respec ve interest in the revocable trust funds to be insured. As such, any co-owner that is not member of that credit union is not insured. 19. Is the interest in an employee bene t account insured any di erently than a member s individual account? Yes. For insurance purposes, employee bene t accounts are insured separately. The ascertainable interest of each par cipant in such account is insured up to the $250,000 maximum separately from other accounts. 20. May a person receive separate insurance on each of several employee bene t plans established by the member s employer with the same credit union? No. If two or more employee bene t plans are established by an employer for the same individual, at the same credit union, the bene ciary s interest in the two accounts will be added together and insured up to the $250,000 standard maximum. 21. What insurance coverage is provided for tradi onal IRAs, Roth IRAs, and Keogh accounts? Tradi onal IRAs, Roth IRAs, and Keogh accounts are insured up to $250,000, separately from other accounts that the member maintains in the same credit union. However, a member s Roth IRA will be added together with his or her tradi onal IRA and insured in the aggregate to the maximum of up to $250,000. A Keogh account is separately insured from the IRA accounts up to $250,

18 22. Are accounts held by a person as executor, administrator, guardian, custodian, or in some other similar duciary capacity insured separately from his individual account? Yes. If the records of the credit union indicate that the person is deposi ng the funds in a duciary capacity, such funds would be separately insured from the duciary s individually owned account. 23. When an account is designated as held by a person as agent for the owner of the funds, how is the account insured? The account is insured as an account of the principal or true owner. The funds in the account are added to any other individual account owned by the owner and the total is then insured up to $250, Is an account held by a corpora on, partnership, or unincorporated associa on insured separately from the individual accounts of the stockholders, partners, or members? Yes. If the corpora on, partnership, or unincorporated associa on has obtained membership in the credit union and is engaged in an independent ac vity, its account is separately insured to $250,000. The term independent ac vity means an ac vity other than one directed solely at increasing share insurance coverage. 17

19 OTHER FREQUENTLY ASKED QUESTIONS 25. Can a federal credit union terminate its NCUSIF coverage? No. A federal credit union cannot be chartered or retain its charter unless it is insured by the NCUSIF. 26. Can a state credit union terminate its par cipa on in the NCUSIF? Yes. A state-chartered credit union can terminate its NCUSIF coverage in some states, but it must obtain the approval of its members and NCUA. In other states, state-chartered credit unions are required to have federal insurance provided by the NCUSIF. NCUA s share insurance is the only share insurance backed by the full faith and credit of the U.S. Government. When a state credit union converts its share insurance to another licensed share insurance program, NCUSIF coverage terminates upon conversion. If the state credit union does not provide for another share insurance program, NCUSIF coverage remains in e ect for one year following the e ec ve date of termina on, but coverage may be reduced depending upon account ac vity during the one year period. 27. What publica ons covering the opera ons of the NCUSIF are available? NCUA publishes an Annual Report which covers the opera ons of the NCUSIF. This report is available on NCUA s website. The report includes nancial statements and an independent audit of the NCUSIF s records. To learn more, visit ncua.gov. 18

20 28. What happens to insured funds that are not claimed by the member at a liquida on payout? At the end of the 18-month insurance period, unclaimed funds are no longer insured, and share account balances are paid based on liquida on and other recoveries. The funds are generally held by NCUA and are available as long as the records of the credit union are available or un l the charter or insurance cer cate is canceled. In some cases funds may be transferred to a state s unclaimed property sec on for a period of me. 29. Where does a credit union member go for informa on about his credit union or speci c ques ons about NCUSIF coverage? The member should rst contact the credit union for the needed informa on. Credit union personnel, however, cannot require the NCUSIF to provide more protec on than is allowed under the Federal Credit Union Act or NCUA Rules and Regula ons. They will be able to obtain informa on for you from NCUA. If the credit union cannot provide the informa on or is no longer in opera on, the member should contact the O ce of Consumer Protec on directly. Contact informa on for the O ce of Consumer Protec on is available on the back cover of this booklet. 30. What e ect does the death of a member have on NCUSIF coverage? The death of a member will not a ect the member s share insurance coverage for a period of six months following death unless the member s share accounts are restructured in that me period. If the accounts are restructured during the six-month grace period or upon the expira on of the six months if not restructured, the share 19

21 insurance coverage will be provided on the basis of actual ownership of the accounts in accordance with the share insurance rules. 31. What e ects does the merger of federally insured credit unions have on NCUSIF coverage? Whenever the liability to pay the member accounts of one or more insured credit unions is assumed by another insured credit union, whether by merger, consolida on, other statutory assump on or contract, the insured status of the credit unions whose member account liability has been assumed terminates on the date of receipt by NCUA of sa sfactory evidence of the assump on. The separate insurance of member accounts assumed con nues for six months from the date the assump on takes e ect or, possibly longer in the case of share cer cates. 20

22 APPENDIX Examples of Insurance Coverage A orded Accounts in Credit Unions Insured by the NCUSIF All of the following examples are based on the $250,000 standard maximum share insurance amount. Addi onally, the following examples illustrate share insurance coverage on accounts maintained in the same federally insured credit union. They are intended to cover various types of ownership interests and combina ons of accounts which may occur in connec on with funds invested in insured credit unions. The examples, as well as the rules which they interpret, are predicated upon the assump on that: (1) funds are actually owned in the manner indicated on the credit union s records; and (2) the owner of funds in an account is a credit union member or otherwise eligible to maintain an insured account in a credit union. If available evidence shows that ownership is di erent from that on the ins tu on s records, the NCUSIF may pay claims for insured accounts on the basis of actual ownership. Further, the examples and the rules which they interpret do not extend share insurance coverage to persons otherwise not en tled to maintain an insured account or to account rela onships that have not been approved by the NCUA Board as an insured account. 21

23 A. SINGLE OWNERSHIP ACCOUNTS All funds owned by an individual member (or, in a community property state, by the husbandwife community of which the individual is a member) and invested by the member in one or more individual accounts are added together and insured to $250,000. This is true whether the accounts are maintained in the name of the individual member owning the funds, in the name of the member s agent or nominee, or in a custodial loan account on behalf of the member as a borrower. All such accounts are added together and insured as one individual account. Funds held in one or more accounts in the name of a guardian, custodian, or conservator for the bene t for the same ward or minor are added together and insured up to the $250,000 maximum. However, such an account or accounts will not be added to any other individual accounts of the guardian, custodian, conservator, ward, or minor for purposes of determining insurance coverage. Example 1 Ques on: Members A and B, spouses, each maintain an individual account containing $250,000. In addi on, they hold a qualifying joint account containing $500,000. What is the insurance coverage? Answer: Each individual account is insured up to $250,000, and the interest of A and the interest of B in the joint account are each insured for $250,000 separately from their individual accounts. The total coverage is $1,000,000. The coverage would be the same whether the individual accounts contain funds owned as 22

24 community property or as individual property of the spouses. Example 2 Ques on: Members H and W, husband and wife, reside in a community property state. H maintains a $250,000 account consis ng of his separately owned funds and deposits $250,000 of community property funds in another account, both of which are in his name alone and at the same federally insured credit union. What is the share insurance coverage? Answer: The two accounts are added together and insured to a total of $250,000, leaving $250,000 uninsured. Example 3 Ques on: Member A has $242,500 deposited in an individual account, and his agent (or duciary), Member B deposits $25,000 of A s funds in a properly designated agency account. B also holds a $250,000 individual account. What is the share insurance coverage? Answer: A s individual account and the agency account are added together and insured to $250,000, leaving $17,500 uninsured. The deposit of funds through an agent does not result in addi onal insurance coverage for the account owner. B s individual account is insured separately from the agency account. However, if the account records of the credit union do not show the duciary rela onship under which the funds in the $25,000 account are held, the $25,000 in B s name could, at the op on of the NCUSIF, be added to his individual account and insured to $250,000 in the aggregate, leaving $25,000 uninsured. 23

25 Example 4 Ques on: Member A holds a $250,000 individual account. Member B holds two accounts in his own name, the rst containing $25,000 and the second containing $242,500. In processing the claims for payment of insurance on these accounts, the NCUSIF discovers that the funds in the $25,000 account actually belong to A and that B deposited these funds as agent for A, his undisclosed account owner. What is the insurance coverage? Answer: Because the available evidence shows that A is the actual owner of the funds in the $25,000 account, those funds would be added to the $250,000 individual account held by A (rather than to B s $242,500 account) and insured to $250,000, leaving $25,000 uninsured. B s $242,500 individual account would be separately insured. Example 5 Ques on: Member C, a minor, maintains an individual account of $750. C s grandfather makes a gi to him of $250,000, which is deposited in another account by C s father, designated on the credit union s records as custodian under the Uniform Gi s to Minors Act. C s father, also a member, maintains an individual account of $250,000. What is the insurance coverage? Answer: C s individual account and the custodian account held for him by his father are each separately insured: the $250,000 maximum on the custodian account, and $750 on the individual account. The individual account held by C s father is also separately insured to the $250,000 maximum. 24

26 Example 6 Ques on: Member G, a court appointed guardian, invests in a properly designated account $250,000 of funds in his custody which belong to member W, his ward. W and G each maintain $25,000 individual accounts. What is the insurance coverage? Answer: W s individual account and the guardianship account in G s name are each separately insured to $250,000 providing W with $275,000 in insured funds. G s individual account is also separately insured. Example 7 Ques on: X Credit Union acts as a servicer of FHA, VA, and conven onal mortgage loans made to its members, but sold to other par es. Each month X receives loan payments for remi ance to the other par es from approximately 2,000 member mortgagors. The monies received each month total $1,000,000 and are maintained in a custodial loan account. What is the insurance coverage? Answer: X Credit Union acts as custodian for the 2,000 individual mortgagors. The interest of each mortgagor is separately insured as his individual account (but added to any other individual accounts which the mortgagor holds in the credit union). B. JOINT ACCOUNTS The interest of a co-owner in all accounts held under any form of joint ownership valid under state law (whether as joint tenants with right of survivorship, tenants by the en re es, tenants in common, or by husband and wife as 25

27 community property) is insured up to $250,000. This insurance is separate from that a orded by individual accounts held by any of the co-owners. An account is insured as a joint account only if each of the co-owners has personally signed a membership card or an account signature card and possesses the same withdrawal rights as the other co-owners. An account owned jointly which does not qualify as a joint account for insurance purposes is insured as if owned by the named persons as individuals. In that case, the actual ownership interest in the account of each person is added to any other accounts individually owned by such person and insured up to the $250,000 standard maximum in the aggregate. Any individual, including a minor, may be a coowner of a joint account. Although, generally, each co-owner must have signed an account signature card and must have the same rights of withdrawal as other co-owners in order for the account to qualify for separate joint account insurance. There is an excep on for minors. If state law limits or restricts a minor s withdrawal rights for example, a minimum age requirement to make a withdrawal the account will s ll be insured as a joint account. The interests of a co-owner in all joint accounts that qualify for separate insurance coverage are insured up to the $250,000 maximum. For insurance purposes, the co-owners of any joint account are deemed to have equal interests in the account. Example 1 Ques on: Members A and B maintain an account as joint tenants with right of survivorship and, in 26

28 addi on, each holds an individual account. Is each account separately insured? Answer: If both A and B have signed the membership or signature card and possess equal withdrawal rights with respect to the joint funds, their interests in the joint account are separately insured from their interests in the individual accounts. If the joint account is represented by a share cer cate, their individual signatures are not required for that account. Example 2 Ques on: Members A and B, who are a married couple, reside in a community property state. Each holds an individual account and, in addi on, they hold a qualifying joint account. The funds in all three accounts consist of community property. Is each account separately insured? Answer: Yes. An account in the individual name of a spouse will be insured up to $250,000 whether the funds consist of community property or separate property of the spouse. A joint account containing community property is separately insured. Thus, community property can be used for individual accounts in the name of each spouse and for a joint account in the name of both spouses. In this example, each individual account is insured up to $250,000, and the interests of both spouses in the joint account are each insured up to $250,000. Example 3 Ques on: Two accounts of $250,000 each are held by a member husband and his wife under the following names: John Smith and Mary Smith, husband and wife, as joint tenants with right 27

29 of survivorship. How much insurance do the husband and wife have? Answer: They have $500,000 of insurance. Both the husband and wife are deemed to have a one half interest ($125,000) in each account. The husband s interest in both accounts would be added together and insured for $250,000. The wife s insurance coverage would be determined the same way. Example 4 Ques on: The following accounts are held by members A, B and C, each of whom has personally executed signature cards for the accounts in which they have an interest. Each co-owner of a joint account possesses the necessary withdrawal rights. What is the insurance coverage? Answer: Accounts numbered 1, 2 and 3 are each separately insured for $250,000 as individual accounts held by A, B and C, respec vely. The interests of the co-owners of each joint account are deemed equal for insurance purposes. A s interest in accounts numbered 4, 5, and 7 are added together for insurance purposes. Thus, A has an interest of $120,000 in account No. 4, $120,000 in account No. 5 and $80,000 in account No. 7, for a total joint account interest of $320,000, of which $250,000 is insured. The interests of B and C are each similarly insured. 28

30 Example 5 Ques on: A, B and C hold accounts as set forth in Example 4. Members A and B are a married couple; C, their minor child, has failed to sign the signature card for Account No. 7. In Account No. 5, according to the terms of the account, C cannot make a withdrawal without A s wri en consent. (This is not a limita on imposed under state law.) In Account No. 6, the signatures of both B and C are required for withdrawal. A has provided all of the funds for Accounts numbered 5 and 7 and under state law has the en re actual ownership interest in these two accounts. What is the insurance coverage? Answer: If any of the co-owners of a joint account have failed to meet any of the joint account requirements, the account is not a qualifying joint account. Instead, the account is treated as if it consisted of commingled individual accounts of each of the co-owners in accordance with the co-owner s actual ownership interest in the funds, as determined under applicable state law. Account No. 5 is not a qualifying joint account because C does not have equal withdrawal rights with A. Based on the terms of the account, C can only make a withdrawal if he has A s written consent. Account No. 7 is not a qualifying joint account because C did not personally sign the signature card. Therefore, all of the funds in Accounts 5 and 7 are treated as individually owned by A and added to A s individual account, Account No. 1. For insurance purposes then, A has $730,000 in one individual account that is insured for $250,000, leaving $480,000 uninsured. Account 6 is a qualifying joint account for share insurance purposes since each co-owner has 29

31 the right to withdraw funds on the same basis. Account 4 is also a qualifying joint account. A s interest in Account 4 is insured for $120,000. B s interest of $120,000 in Account 4 is added to her interest of $120,000 in Account 6 and insured for $240,000. C s interest in Account 6 is insured for $120,000. Example 5(a) Ques on: Assume the same accounts as Example 5 except that, on Account No. 5, C s right to make a withdrawal is limited by state law which precludes a minor from making a withdrawal without the co-owner s wri en consent. What is the insurance coverage? Answer: In this situa on, Accounts 4, 5, and 6 all qualify as joint accounts. A, B, and C will each have $240,000 of insured funds based on: A s interest in Account 4 ($120,000) and 5 ($120,000), B s interest in Accounts 4 ($120,000) and 6 ($120,000), and C s interest in Accounts 5 ($120,000) and 6 ($120,000). As in Example 5, Account No. 7 does not qualify as a joint account and would be added to A s individual account for share insurance purposes. Example 6 Ques on: If a person has an interest in more than one joint account at the same federally-insured credit union, what is the extent of the insurance coverage? Answer: A person holding an interest in more than one joint account may receive $250,000 on the total of his/her interests in all of those joint accounts. For example, assume that A and B own 30

32 a joint account containing $220,000 and A and C own a joint account containing $100,000. The interests of the co-owners of a joint account are deemed equal for insurance purposes. A has an interest of $110,000 in the account with B, and an interest of $50,000 in the account with C. A would have insurance of $160,000. B would have insurance of $110,000 and C would have insurance of $50,000. In this example, all of the funds held in the two joint accounts would be insured. Example 7 The following illustra ons show how typical families may use mul ple ownership of accounts to increase the insurance coverage for their family funds. The examples are not all inclusive, as other op ons are also available. In all cases, the accounts illustrated must meet the share insurance coverage requirements as published in the Code of Federal Regula ons (12 C.F.R. Part 745). Family of Two 31

33 Family of Three The husband is insured to $250,000 on his two accounts with his wife and child. The wife is insured to $250,000 on her two accounts with her husband and child. The child is insured to $250,000 on the child s accounts with the father and mother. ($750,000 for all individual accounts plus $750,000 for all joint accounts plus $1,000,000 for all revocable trust accounts) Family of Four 32

34 As in the previous illustra on, none of the coowners has an interest of more than $250,000 in all of the joint accounts, so the total amount held by the each of the co-owners in all of the joint accounts is insured. ($1,000,000 for all individual accounts plus $1,000,000 for all joint accounts plus $1,500,000 for all revocable trust accounts) C. REVOCABLE TRUST ACCOUNTS This sec on explains NCUA share insurance coverage for revocable trust accounts, and is not intended as estate planning advice or guidance. Members should contact a legal or nancial advisor for assistance with estate planning. A revocable trust account is a share account owned by one or more people iden fying one or more bene ciaries who will receive the funds upon the death of the owner(s). An owner of a revocable trust has discre on to change, terminate, or revoke the trust at any me. In this sec on, the term owner means the grantor or se lor of the revocable trust. Although some unique circumstances can exist, depending upon state law, in general when calcula ng insurance coverage, trustees, cotrustees, and successor trustees are not relevant. They are administrators and have no impact on insurance coverage unless they also are the owners or bene ciaries of the trust. For the purposes of share insurance coverage, the revocable trust category includes both informal and formal revocable trusts: 33

35 Informal revocable trusts o en called payable on death (POD), To en trust, in trust for (ITF), or as trustee for accounts (ATF) are created when the account owner signs an agreement usually part of the signature card direc ng the credit union to transfer the funds in the account to one or more eligible named bene ciaries upon the owner s death. Formal revocable trusts known as living or family trusts are wri en trusts created for estate planning purposes. The owner controls the funds and other assets in the trust during his or her life me. The agreement establishes that the funds are to be paid to one or more iden ed bene ciaries upon the owner s death. The trust generally becomes irrevocable, or par ally irrevocable, upon the owner s death. All funds an owner has in both informal and formal revocable trusts are added together for insurance purposes, and the insurance limit is applied to the combined total. Coverage and Requirements for Revocable Trust Accounts In general, the owner of a revocable trust account is insured up to $250,000 for each di erent bene ciary, if all of the following requirements are met: 1. The account tle or other account records of the credit union must indicate the account is held pursuant to a trust rela onship. This rule can be met by using the terms payable on death (or POD), in trust for (or ITF), as trustee for (or ATF), living trust, family trust, or any similar language to indicate the existence of a trust rela onship. 34

36 2. For informal revocable trusts, the bene ciaries must be iden ed by name in the account records of the insured credit union. 3. To qualify as an eligible bene ciary, the bene ciary must be a natural person, charity, or non-pro t organiza on (as recognized by the Internal Revenue Service). An account must meet all of the above requirements to be insured separately as a revocable trust. Typically, if any of the above requirements are not met, the por on of the account that does not qualify is added to the owner s other individual accounts, if any, at the same credit union and insured up to $250,000. If the trust has mul ple owners, the amount that does not qualify for coverage as a revocable trust would be added to each owner s individual accounts based on their ownership interests. An owner who iden es a bene ciary as having a life estate interest in a formal revocable trust, such as a living trust, is en tled to insurance coverage up to $250,000 for that bene ciary. A life estate bene ciary is a bene ciary who has the right to receive income from the trust or to use trust funds during the bene ciary s life me. For example: A husband is the sole owner of a living trust that gives his wife a life estate interest in the trust funds, with the remainder going to their two children upon his wife s death. Maximum insurance coverage for this account is calculated as follows: $250,000 mes one owner with three di erent bene ciaries equals $750,

37 REVOCABLE TRUST INSURANCE COMPUTATION METHODS General Framework Insurance coverage for revocable trust accounts is calculated di erently depending on the number of eligible bene ciaries named by the owner, the bene ciaries interests, and the amount of the funds. A common mistake that members make in calcula ng coverage for revocable trust accounts is assuming that every person named on a revocable trust account both the owner(s) and the bene ciaries receives up to $250,000 in share insurance coverage. This is not correct. Each owner of a revocable trust may be en tled to insurance coverage up to $250,000 for each bene ciary that the account owner designates in the revocable trust account. If all of the bene ciaries are eligible and have equal interests, the insurance coverage for each owner is calculated by mul plying $250,000 mes the number of bene ciaries, not $250,000 mes the number of owners plus the number of bene ciaries. If the bene ciaries are not all eligible, or have unequal interests, the above calcula on should not be used. All funds a ributable to noneligible bene ciaries are aggregated and insured up to $250,000 as the single account funds of the trust owner. In addi on, if the trust account speci es di erent interests for the bene ciaries, the owner may be insured up to each bene ciary s actual interest in the trust. 36

38 Another common misunderstanding is that the trust agreement itself is en tled to an addi onal $250,000 of share insurance coverage. This is not correct. If a payable on death account has more than one owner (such as a married couple) or is held for mul ple bene ciaries, the insured balance of the account can exceed $250,000. NCUA will assume that the owners shares are equal unless the credit union s account records state otherwise. Similarly, if there are mul ple bene ciaries, NCUA will assume the bene ciaries interests are equal unless otherwise stated in the account records. Two calcula on methods are used to determine insurance coverage of revocable trust accounts: one method is used only when a revocable trust owner has ve or fewer di erent bene ciaries; the other method is used only when an owner has six or more di erent bene ciaries. If a trust has more than one owner, each owner s insurance coverage is calculated separately. Revocable Trust Insurance Coverage - Five or Fewer Di erent Bene ciaries When a revocable trust owner names ve or fewer bene ciaries, the funds have coverage of up to $250,000 for each di erent bene ciary. This rule applies to the combined interests of all bene ciaries the owner has named in all formal and informal revocable trust accounts at the same credit union. When there are ve or fewer bene ciaries, the maximum share insurance coverage for each trust owner is determined by mul plying $250,000 mes the number of di erent bene ciaries, regardless of 37

39 the dollar amount or percentage allo ed to each di erent bene ciary. Example 1 Payable on death with one owner Explana on: The father has three revocable trust accounts at the same federally insured credit union. Maximum insurance coverage for these accounts is calculated as $250,000 mes one owner with three bene ciaries, which equals $750,000. These accounts have full insurance coverage. Example 2 Mul ple Revocable Trust Accounts with Five or Fewer Di erent Bene ciaries Explana on: When a revocable trust owner names ve or fewer bene ciaries, the owner receives up to $250,000 in insurance coverage for each di erent bene ciary. 38

40 Person A s total ownership: $350,000 (50% of Account 1) Person B s total ownership: $800,000 (50% of Account 1 & 100% of Account 2) Because A named two di erent bene ciaries, the maximum insurance coverage is $500,000 ($250,000 mes two bene ciaries). Because A s total ownership of revocable trust accounts of $350,000 is less than $500,000, A has full coverage. Because B named three di erent bene ciaries between accounts 1 and 2, B s maximum insurance coverage is up to $750,000 ($250,000 mes three bene ciaries). Because B s total ownership of revocable trust accounts of $800,000 exceeds $750,000, B is uninsured for $50,000. Revocable Trust Insurance Coverage - Six or More Di erent Bene ciaries Six or More Di erent Bene ciaries with Equal Bene cial Interests When a revocable trust owner names six or more di erent bene ciaries, and all the bene ciaries have an equal interest in the trust, the insurance calcula on is the same as for revocable trusts that name ve or fewer bene ciaries. The trust owner receives insurance coverage up to $250,000 for each di erent bene ciary. As shown in the following example, with one owner and six bene ciaries, where all the bene ciaries have an equal bene cial interest, the owner s maximum share insurance coverage is up to $1,500,

41 Example 3 - Maximum insurance coverage for each revocable trust owner when there are six or more di erent bene ciaries with unequal bene cial interests Six or More Di erent Bene ciaries with Unequal Bene cial Interests When a revocable trust owner names six or more bene ciaries and the bene ciaries do not have equal bene cial interests (that is, they receive di erent amounts), the owner s revocable trust accounts are insured for the greater of either: (1) the sum of each bene ciary s actual interest in the revocable trust accounts up to $250,000 for each di erent bene ciary; or (2) $1,250,000. Addi onal Informa on about Living (or Family Trust) Accounts Living or family trust accounts are insured up to $250,000 per owner for each named bene ciary if all of the following requirements are met: 1. The account tle or other account records at the credit union must indicate that the account is held pursuant to a trust rela onship. This rule can be met by using the term living trust, family trust, or similar language. 2. The bene ciaries must be eligible as de ned for payable on death accounts earlier. Note: The share insurance coverage calcula on for a formal revocable trust 40

42 depends on if all owners and bene ciaries are living and the bene ciaries are iden ed in the trust document. While the owners of a trust may bene t from the trust during their life mes, they are not considered bene ciaries for the purpose of calcula ng share insurance coverage. Bene ciaries are those iden ed by the owner to receive an interest in the account in the event of the owners deaths. The account records must iden fy the bene ciaries by name. Share insurance coverage for a revocable living trust account depends upon the answers to the following speci c ques ons: Do the account tle or account records at the credit union indicate that the account is held by a trust? This requirement can easily be met by using the words living trust, or family trust, or similar terms. Who are the owners of the trust? The owners are commonly referred to in the formal revocable trust document as trustees, grantors or se lors. For the purpose of calcula ng share insurance coverage only, the trustees, co-trustees, and successor trustees are not relevant. They are administrators and have no impact on share insurance coverage unless they are also the owners of the trust. Who are the bene ciaries of the trust? The bene ciaries are the people or en es en tled to an interest in the trust. Con ngent or alterna ve trust bene ciaries are not considered to have an interest in the trust funds and other assets as 41